COOL Deadline Looms: What’s Next?

Earlier this year, USDA released revised mandatory country-of-origin-labeling rules. It was in response to a World Trade Organization ruling that the initial version of the U.S. law discriminated against Mexican and Canadian beef. However, Mexico and Canada say the revised rules aren’t sufficient and are preparing to impose retaliatory tariffs.

Like most fights, this one never should have gotten started in the first place. But if politics creates strange bedfellows, it can sometimes create even stranger laws. And once political turf gets staked out, pride and prejudice make it hard to retreat.

Whether or not that situation is at play in the current dispute over the U.S. mandatory country-of-origin (MCOOL) law, however, is a discussion for the political scientists. In the rough and tumble world of international trade, the situation is this: the U.S. instituted its law several years ago, which mandated that all beef, pork and certain other products be labeled as to its origins. Canada and Mexico sued the U.S. and the World Trade Organization (WTO) ruled against the U.S. twice – first in the initial suit and again when the U.S. appealed.

WTO gave the U.S. until May 23 to come into compliance with international trade laws. Earlier this year, USDA released revised MCOOL regulations that both Canada and Mexico say not only don’t meet WTO expectations, but make the situation even worse.

And that, says Andres Piedra, chief economist with Confederacion Nacional Ganadera (CNG), the national cattlemen’s association in Mexico, leaves them only one alternative – institute retaliatory tariffs as allowed under WTO.

“In our talks with our Minister of Economy, it looks like the measures are going to be very similar to those imposed by the trucking litigation,” Piedra says, referring to a dispute several years ago where the U.S. banned Mexican trucks from crossing the border. “We will consider a wide range of products and those products will vary with time. But they will no doubt include beef,” he says.

“Our feeling is the diminishing exports of (U.S.) beef to Mexico will continue to go down with the imposition of compensatory tariffs. It will make (U.S. beef) less competitive with beef coming from Canada and other countries.” Piedra estimates Mexico will begin imposing retaliatory tariffs within the next six months.

Mexico and Canada have to present a justification of how much damage they suffered as a result of the loss in value of their products because of the MCOOL law. “What I heard from the Canadians is they want to apply damages on their cattle of $500 million,” Piedra says. “In Mexico, we are still working on it, but we have a preliminary figure that will probably go between $500 million and $800 million per year. That figure would be the amount that our country would have the right to apply on compensatory targets of U.S. products.”

According to the U.S. Meat Export Federation, Canada recently took over the number-one spot as a destination for U.S. beef exports, outflanking Mexico to gain the top spot in the first quarter of 2013. Mexico currently ranks second in export volume, and third behind Canada and Japan in the value of the beef it buys from the U.S.